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Determinants of the Growth Semi-Elasticity of Poverty Reduction

In this paper we examine the mathematical relationship between growth and distributional change on absolute (i.e. percentage point) changes in FGT poverty measures assuming a log-normal income distribution, which we argue to be a conceptually superior and more policy-relevant measure than the much used ’regular’ growth elasticity of poverty reduction. We also test the empirical relationship of these semi-elasticities of growth and distributional change on poverty and find them to explain actual changes in poverty very well (in fact, much better than a related study by Bourguignon (2003) that studied the growth elasticity of poverty reduction). This is particularly the case when poverty depth and severity is considered. Using our results helps in interpreting past performance in poverty reduction and will allow a rapid and quite reliable prediction of the impact of growth and distributional change on (absolute) poverty reduction across countries, taking heterogeneity in country circumstances into account.

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Paper provided by Ibero-America Institute for Economic Research in its series Ibero America Institute for Econ. Research (IAI) Discussion Papers with number 176.

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Length: 33 pages
Date of creation: 17 Oct 2008
Date of revision:
Handle: RePEc:got:iaidps:176
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  1. Kakwani, Nanak, 1993. "Poverty and Economic Growth with Application to Cote d'Ivoire," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(2), pages 121-39, June.
  2. Ravallion, Martin & Shaohua Chen, 1996. "What can new survey data tell us about recent changes in distribution and poverty?," Policy Research Working Paper Series 1694, The World Bank.
  3. Ravallion, Martin & Huppi, Monika, 1991. "Measuring Changes in Poverty: A Methodological Case Study of Indonesia during an Adjustment Period," World Bank Economic Review, World Bank Group, vol. 5(1), pages 57-82, January.
  4. Rati Ram, 2006. "Growth Elasticity of Poverty: Alternative Estimates and a Note of Caution," Kyklos, Wiley Blackwell, vol. 59(4), pages 601-610, November.
  5. Ravallion, Martin & Chen, Shaohua, 2007. "China's (uneven) progress against poverty," Journal of Development Economics, Elsevier, vol. 82(1), pages 1-42, January.
  6. Datt, Gaurav & Ravallion, Martin, 1992. "Growth and redistribution components of changes in poverty measures : A decomposition with applications to Brazil and India in the 1980s," Journal of Development Economics, Elsevier, vol. 38(2), pages 275-295, April.
  7. Kraay, Aart, 2006. "When is growth pro-poor? Evidence from a panel of countries," Journal of Development Economics, Elsevier, vol. 80(1), pages 198-227, June.
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